At 7.45am AEDT, the AUD/USD bought .7466, up 0.35% for the session. It now trades at the highest level seen since July 15, 2015.
David de Garis, senior economist at the NAB, summed up the unbelievable price action in commodities that contributed to the Aussie’s continued move higher.
“Ever had one of those moments when you start the day and you have a rather weird moment to start the day? Well it happened this morning,” said de Garis.
“One of the first things I check after opening the screens is the iron ore price and I had to look several times this morning to make sure I wasn’t in another universe. But there it was: $63.74/t, up a cool $9.99/t, +18.59%! ‘Must be a wrong feed’, I thought, but here it was.
“Given some credence by the fact that Dalian iron ore futures rose 5.88% yesterday, while Chinese steel rebar futures rose 7.97%, all after the weekend’s official growth announcements from China.”
While the sharp spike in iron ore helped to boost sentiment towards the Australian dollar, Joseph Capurso, currency strategist at the CBA, described the reaction in commodity markets as “overdone”.
“Higher commodity prices reflect a reaction to China’s National People’s Congress (NPC),” said Capurso. “We think the reaction by commodity prices and AUD is overdone because the policy stimulus occurring in China is small compared to the headwinds facing the economy.”
Indeed, looking at China’s forecasts for rail and motorway spending in 2016, shown in the table below from Credit Suisse, there is no discernible difference between expenditure this year compared to 2015.
Commodity market movements aside, markets today will be focused on a speech from RBA deputy governor Philip Lowe (10.20am AEDT), the latest NAB Australian business confidence survey (11.30am AEDT) along with Chinese trade data for February released around 1pm AEDT.
In particular, markets will be watching for any commentary from Lowe, if any, on his views towards the recent commodity-linked surge in the Australian dollar.
Here’s the full Australian dollar scoreboard in early Asian trade.
- AUD/USD 0.7466 , 0.0026 , 0.35%
- AUD/JPY 84.63 , 0.24 , 0.28%
- AUD/CNH 4.8560 , 0.033 , 0.68%
- AUD/EUR 0.6778 , 0.0038 , 0.56%
- AUD/GBP 0.5232 , 0.002 , 0.38%
- AUD/NZD 1.1013 , 0.0132 , 1.21%